Finance Minister Nirmala Sitharaman, after the 56th GST Council meeting, announced a major cut in GST rates. These changes will come into effect from September 22 and are expected to have a positive impact on the pockets of millions of Indians.
In the new GST structure, there will mainly be two rates, 5% and 18%, while a special rate of 40% has been fixed for certain goods.
Let’s understand what has become cheaper and what has become costlier under this GST reform, along with the sectors that will see a positive impact.
What’s Happening?
On September 3, 2025 (Wednesday), the GST Council, in its 56th meeting, took a historic decision to simplify the existing four-tier GST structure. Now, there will primarily be two main rates, 5% and 18%. Almost all items in the 12% and 28% categories have been shifted to lower rates. Most importantly, about 99% of items from the 12% category have been moved to 5%, and nearly 90% of items from the 28% category have been included under 18%.
This significant decision will directly benefit the common people. Taxes on everyday essentials such as groceries, medicines, shampoo, hair oil, butter, and ghee will be reduced. Similarly, products like air conditioners, televisions, cement, and small cars will attract lower GST compared to their existing rates, leading to reduced prices. On the other hand, sin goods such as pan masala, tobacco, and aerated beverages, along with high-end vehicles, will face higher tax rates, making them more expensive.
Big Relief on Everyday Essentials
Under the new GST rates, there has been major relief on daily-use items. UHT milk, paneer, paratha, pizza bread, khakhra, and roti have been completely exempted from GST. Butter, ghee, cheese, jam, sauces, soups, pasta, namkeen, and sweets will now attract only 5% tax, compared to the earlier 12–18%. Dry fruits such as almonds, pistachios, and cashews, along with dates and citrus fruits, will also now fall under the 5% bracket.
Personal care products have also received significant relief. Hair oil, shampoo, toothpaste, soap, shaving products, talcum powder, toothbrushes, candles, and safety matches will now be available at just 5% GST. Stationery items like notebooks, pencils, sharpeners, and erasers will no longer attract any tax. Toys, sports goods, handicrafts, and furniture made from bamboo or cane have also been brought under the 5% category.
Impact on Other Sectors
The changes in GST rates will have a wide impact on sectors like agriculture, automobiles, electronics, and healthcare. Tractors and their parts, biopesticides, micronutrients, drip irrigation systems, sprinklers, and agricultural machinery will now attract only 5% GST.
In healthcare, significant changes have also been introduced. Life-saving drugs such as Agalsidase Beta, Onasemnogene, Daratumumab, and Alectinib have been made completely tax-free. Meanwhile, most medicines, medical devices, diagnostic kits, bandages, thermometers, and oxygen will now attract only 5% GST.
On the other hand, small cars (petrol, diesel, LPG, CNG, hybrid), three-wheelers, motorcycles up to 350cc, goods transport vehicles, air conditioners, televisions larger than 32 inches, monitors, projectors, and dishwashers will attract an 18% GST rate.
What’s in it for Investors?
The GST reform brings both opportunities and challenges for investors. Lower taxes on everyday essentials are expected to boost domestic demand, benefiting FMCG, auto, healthcare, consumer goods, and agriculture companies.
However, the government may face a revenue loss of about Rs 48,000 crore, which could put pressure on the fiscal deficit. At the same time, taxes on luxury items and sin goods, as well as sugar-based drinks, have been increased from 28% to 40%. This includes pan masala, gutkha, chewing tobacco, cigarettes, carbonated and caffeine-based drinks, and fruit-based fizzy drinks. This change could impact the growth of companies in these sectors.
Overall, for investors, this reform opens up opportunities in consumer-driven sectors while posing challenges for businesses linked to sin goods and luxury items.
What’s Next?
During his Independence Day address, Prime Minister Narendra Modi announced next-generation GST reforms, and the recent changes mark a big step in that direction. He highlighted that these reforms would benefit farmers, MSMEs, the middle class, women, and the youth.
According to The Economic Times, experts believe this move will boost spending activity and support GDP growth. Estimates suggest that nominal GDP could see an improvement of 20–30 basis points. In the first quarter, the Indian economy had already recorded 7.8% real growth and 8.8% nominal growth.
*This article is for informational purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
